Industry Experts Weigh In on FedEx 2.0 Consolidation Strategy

With its long planned-out focus on consolidating its operating companies into a single organization, the heavy lifting is now under way for Memphis-based global freight transportation and logistics services provider FedEx.

As previously reported by LM, FedEx has described this consolidation as a phased transition that will subsequently bring nearly all of its operating companies—FedEx Express, FedEx Ground, FedEx Services, as well as other FedEx operating companies—into Federal Express Corporation, and transition into what it called a single company operating a unified, fully integrated air-ground network. And it also noted that its less-than-truckload subsidiary, FedEx Freight, will remain as a standalone operation within Federal Express Corporation.

What’s more, FedEx said that this consolidation will play a key role in facilitating the company’s DRIVE initiative, which includes Network 2.0, a years-long effort focusing on operational efficiency, in which the company picks up, transports, and delivers packages in the U.S. and Canada. Another benefit of the consolidation, it cited, is to “bring distinct focus on the air network and international volume, as well as a more holistic approach to operations on the ground utilizing both FedEx employees and contracted service providers.”

“We run our business to better align with market demand and operate more efficiently,” explained FedEx CEO Raj Subramanian at an investor conference earlier this year. “And this is the reason why in April 2023, just over a year ago, we announced a multiyear strategy to unify our businesses and create the world's most flexible efficient, and intelligent network. And one important pillar of that transformation is what we call Network 2.0. It is the network of the future, where we are combining our Express and Ground networks in the U.S. and Canada. And the best way to think of Network 2.0 is one truck, one label. We’ve spent the past several years updating our technology and facilities to prepare, and we are now in the execution phase. We have already implemented Network 2.0 in over 50 locations with dozens more to follow this calendar year. And as we have stated previously, we're targeting a $2 billion in cost savings in FY '27.”

Industry stakeholders offered up their respective takes on this initiative to LM, providing insights from strategic, operational, and financial perspectives.

Matt Bohn, Senior Consultant for San Diego-based Shipware, an audit and parcel consulting services company, as well as a former FedEx revenue management advisor, observed that perhaps the biggest immediate noticeable change from a customer perspective will be the move from separate ground and express pickups to a single pickup.

“UPS has held a competitive advantage with its unified model from this perspective, so shippers who strongly prefer a single pickup for both ground and express will have another carrier that is viable,” he said. This is especially important to some SMB shippers, so the Network 2.0 could bring additional opportunities to FedEx.”

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